Case law analysis: The name of the game
In a previous issue (CJ 18 April), I reported on the case of Laurence McIntosh Ltd -v- Balfour Beatty Group and the Trustees of the National Library of Scotland. That case was brought before Lord Drummond-Young in the Outer House of the Court of Session in Scotland and concerned the implication of legal action being commenced by a party other than the contracting party. A few months later, an almost parallel case came before the same judge in the same court. On both occasions, the same claims consultant started proceedings by getting the name of his client wrong.
This case concerns John Stirling trading as M&S Contracts -v- Westminster Properties Scotland Limited. In October 2004, the parties entered into a contract for refurbishment works to be carried out by the pursuer (or claimant) at St Annes. The terms of the contract were contained in a letter written by Westminster's agents and addressed to "John Stirling, M&S Contracts".
In November 2004, a company known as M&S Contracts Limited was incorporated, in which John Stirling was the sole director. Thereafter, in the administration of the parties' contract, a substantial number of documents were issued in the name of the company or were sent to the company.
That course of dealing continued without difficulties for the next nine months until the issue of certificate for payment No 6 in July 2005. The certificate, in the sum of £48,667.50 plus VAT, was due for payment within 14 days of issue. On the certificate, the contractor was referred to as "M&S Contracts". The invoice issued by M&S Contracts Limited on 14 July 2005 was not paid by Westminster.
Adjudication begins
Frustrated by the lack of payment, the contractor commenced adjudication proceedings. In September 2005, a firm of claims consultants acting for the contractor issued a notice of adjudication wherein the name of the referring party was stated as "M&S Contracts Limited". Westminster's position in this adjudication was that as M&S Contracts Limited's incorporation was made after the date on which the contract was concluded, it could not be a party to the contract.
M&S Contracts Limited consequently abandoned this adjudication. Almost immediately, a fresh notice of adjudication was issued on Westminster, this time bearing the name of "John Stirling, trading as M&S Contracts" as the referring party.
Westminster's position in this second adjudication was that the adjudicator lacked the necessary jurisdiction as no dispute had crystallised between the pursuer (John Stirling trading as M&S Contracts) and the defenders. Notwithstanding this challenge, the adjudicator proceeded to determine that Westminster should pay to the referring party the sum found due in certificate No 6 (plus interest).
Westminster failed to comply with the adjudicator's decision and consequently the pursuer raised an action against the defenders for enforcement. Again, Westminster asserted that no dispute existed between the parties to the action prior to the notice of adjudication being served on 26 September 2005 and that as a result the adjudicator lacked jurisdiction. Consequently, they argued that his decision was a nullity.
In considering whether a dispute or difference existed prior to the second notice of adjudication, Lord Drummond-Young reviewed the authorities on this matter. He considered a series of helpful propositions outlined by His Honour Judge Jackson Jackson in Amec Civil Engineering Ltd -v- Secretary of State for Transport on what constituted a dispute (noting that these propositions were endorsed by the Court of Appeal).
He also found that the construction of the word 'dispute' by Judge Thornton in the Fastrack Contractors Limited -v- Morrison Construction case to be of great assistance. Lord Drummond-Young found the approach to the interpretation of what constitutes a 'dispute or difference' is largely the same in Scotland as it is in England.
Basic meaning
He concluded that the fundamental feature of a 'dispute or difference' is that there had to be an element of disagreement as to the parties' rights and obligations that could manifest itself from the express terms of the parties' correspondence or by implication from their conduct. Such an implication may appear from the mere failure of the respondent to act, but in such cases it must be clear in all circumstances that there is a disagreement between the parties as to their respective rights and obligations. A failure to pay because of the lack of funds or an administrative oversight would not give rise to an inference that a dispute or difference existed.
In relation to this case, the judge noted that Westminster had failed to dispute the amount due in certificate No 6 and had failed to make payment of that amount. Of great importance was the fact that Westminster had failed to give any reason for its non-payment. The fact that correspondence passed, albeit using the name of the company, is significant because it gave the defenders a good opportunity to explain their failure to pay, which they failed to use.
Genuine disagreement
In these circumstances, the judge held that the inference must be drawn that a genuine disagreement existed between the parties as to their respective rights and obligations following the issue of certificate No 6. Consequently, he held that such an inference could have been drawn prior to the serving of the second notice of adjudication. He therefore concluded that a 'dispute or difference' did exist prior to the commencement of adjudication proceedings.
As for the course of dealings between Westminster and M&S Contracts Limited, Lord Drummond-Young found the company was acting as an ad hoc agent for the contracting party. Such an arrangement constituted normal commercial practice, which was applicable to the issuing of correspondence, invoices, notices and the like. However, he stated that when matters enter into a formal process, such as litigation or adjudication, the correct party must be named.
The case: John Stirling trading as M&S Contracts -v- Westminster Properties Scotland Limited.
The issue: Whether a dispute or difference capable of reference to adjudication can exist where a course of dealing had been established by a party other than the contracting party.
The implication: Only the contracting parties can refer a dispute or difference to adjudication. A party other than the contracting party may act as an ad hoc agent for all matters other than formal proceedings.